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THE  CAMPAIGN  AGAINST 
THE  LOAN  SHARK 


ARTHUR  H.  HAM 


R'S 
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Published  by 

Division  of  Remedial  Loans 

Russell  Sage  Foundation 

105  East  Twenty-second  Street,  New  York  City 


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THE  CAMPAIGN  AGAINST  THE  LOAN  SHARK 

ARTHUR  H.  HAM 

The  loan  shark  in  his  arrogant  disregard  of  human  rights  continues 
in  most  cities  to  exact  unreasonable  tribute  from  the  wretched  men  caught 
in  his  net  Leading  newspapers  throughout  the  country  have  constantly 
denounced  the  business  of  making  small  loans  upon  the  security  of  pled/e 
or  mortgage  of  personal  property  or  assignment  of  wages.  Drastic  laws 
have  been  invoked  in  many  states  against  it.  Societies  have  been  organ- 
ized to  protect  victims  from  unjust  practices,  but  the  press  accounts  are 
soon  forgotten  by  all  save  the  unfortunate  clients  of  the  money  lenders 
and  the  campaign  to  remedy  the  conditions  surrounding  the  business  has 
been  marked  by  years  of  fruitless  struggle. 

Laws  are  constantly  and  uniformly  evaded,  ignored  and  defied 
I  he  government  officials  and  legislators  have  repeatedly  announced  their 
hrm  intention  to  drive  the  loan  shark  out  of  existence.  Grand  juries 
have  time  and  again  returned  indictments  against  these  gentry  accom- 
panying their  presentments  with  statements  of  extortion  and  oppression 
almost  unbelievable  in  this  enlightened  age,  but  still  this  blot  on  our 
civihzahon  remains  and  appears  to  careful  pbservers  even  to  increase  in 
size.  The  complexity  of  the  problem  has  been  intensified  by  indications 
of  wholesale  legislative  corruption,  collusion  of  officers  of  the  law  and 
connivance  of  city  employes  holding  positions  of  authority,  and  pay- 
masters and  cashiers  of  large  establishments  whose  employes  aflford  the 
professional  money-lender  easy  prey.  The  statement  could  doubtless  be 
l;roved  that  every  city  in  the  United  States  of  more  than  25,000  popula- 
tion containing  to  any  appreciable  extent  citizens  dependent  on  fixed 
salaries  or  wages  is  infested  with  loan  sharks  in  the  proportion  of  i  to 
5,000  and  at  least  20  per  cent  of  the  voting  population  are  discounting 
two  days  labor  for  the  immediate  price  of  one.  It  is  not  only  the 
transfer  of  this  money  from  the  channels  of  legitimate  trade,  the  cur- 
tailment of  bodily  comforts,  recreation  and  education,  but  also  the  graver 
aspects  of  impaired  morals,  decreased  efficiency,  family  desertions  and 
crime  directly  traceable  to  the  loan  shark  business  that  render  it  worthy 
of  public  attention  and  concerted  eflFort  toward  its  elimination 

What  IS  responsible  for  this  system  of  peonage?  What  maintains 
It  in  a  flourishing  condition  despite  the  many  and  varied  attempts  to 
remove  it?  How  can  men  be  so  reckless  as  to  borrow  from  these  agen- 
cies that  are  everywhere  known  as  sharks,  leeches  and  remorseless  extor- 
tioners? It  is  clear  that  these  concerns  cater  to  a  need  that  is  in  some 
part  real  and  unavoidable,  that  the  majority  of  borrowers  have  been  over- 
taken by  sudden  emergencies  which  under  their  standard  of  living  cannot 
be  met  out  of  income.  To  such,  an  easy  and  quick  means  of  relief 
seems  acceptable  at  any  price,  especially  if  no  other  and  more  reasonable 
source  of  assistance  is  at  hand. 


The  many  unsuccessful  attempts  to  legislate  the  usurious  money- 
lender out  of  existence  have  shown  one  thing  very  clearly,  that  a  law 
that  comes  between  the  unscrupulous  man  who  has  money  to  lend  and 
the  man  who  wants  to  borrow  cannot  be  enforced  until  an  agency  is 
established  to  satisfy  his  need  at  a  lower  cost.  Recognizing  this  fact, 
philanthropic  men  in  nearly  twenty  cities,  content  with  a  reasonable  return 
upon  their  investment,  have  organized  remedial  societies  to  make  loans 
at  the  lowest  rates  of  interest  practicable  to  deserving  people  upon  se- 
curity of  personal  property  pledged  or  mortgaged.  The  first  few  of 
these  societies  came  into  existence  at  intervals  sometimes  of  several  years. 
In  1909  representatives  of  thirteen  of  them  met  in  Buffalo  at  the  invi- 
tation of  the  National  Conference  of  Charities  and  Correction  and  formed 
the  National  Federation  of  Remedial  Loan  Associations.  The  purpose 
was  to  substitute  concerted  action  for  sporadic  effort;  to  assist  by  advice 
and  information  in  the  organization  of  remedial  loan  societies  wherever 
needed.  The  Russell  Sage  Foundation  soon  organized  a  division  of 
remedial  loans  for  the  partial  purpose  of  assisting  the  Federation  in  its 
work,  and  as  a  result  the  membership  of  the  Federation  has  practically 
doubled  since  1909. 

In  many  cities  efforts  are  now  being  made  by  citizens  backed  by 
chambers  of  commerce  and  boards  of  trade  to  organize  similar  societies. 
Those  in  operation  have  proved  themselves  a  practical  and  measurably 
successful  means  of  accomplishing  what  drastic  legislation  and  popular 
clamor  has  been  powerless  to  do.  The  loan  shark  has  not  been  entirely 
eliminated  from  the  cities  in  which  these  societies  operate,  but  his  exac- 
tions have  been  reduced  appreciably.  This  pioneer  work  has  removed 
the  remedial  loan  idea  from  the  experimental  state,  and  organizers  of 
societies  in  other  cities  are  assured  of  success  from  the  start  under  proper 
management. 

In  several  states  satisfactory  laws  have  replaced  the  old-time  drastic 
legislation  impossible  of  enforcement.  Legislators  are  beginning  to 
realize  the  force  of  Blackstone's  comment,  "Without  some  profit  allowed 
by  law,  there  will  be  but  few  lenders,  and  those  principally  bad  men  who 
will  break  through  the  law,  and  make  a  profit,  and  then  will  endeavor 
to  indemnify  themselves  from  the  danger  of  the  penalty  by  making  that 
profit  exorbitant." 

Briefly  stated,  the  program  of  the  remedial  loan  movement  includes 
the  organization  in  all  cities  of  competitive  loan  societies  of  a  social  na- 
ture in  the  pawnbroking  and  chattel  loan  fields ;  the  establishment  of  co- 
operative associations  for  savings  and  loans  among  employes,  supple- 
mented by  the  investment  of  honest  capital  on  a  reasonable  money-making 
basis.  In  all  states  legislation  will  be  sought  chiefly  to  facilitate  this 
competition.  Satisfactory  laws  will  deal  fairly  with  all  parties  con- 
cerned, recognizing  the  small  loan  business  as  a  necessary  element  in  our 
financial^  system,  to  be  legalized,  regulated  and  controlled,  allowing  rea- 
sonable interest  rates  and  proper  supervision,  and  adequately  protecting 
the  borrower  from  unjust  charges  and  dishonest  practices. 

(Reprinted  from  The  Survey  Press  Service.) 


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DUE  AS  STAMPED  BELOW 

JAM  14  2003 


SEP  2  9  200? 


DD20  15M  4-02 


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